World Economic Forum Annual Meeting 2013

The Future Value Chain

These insights were written by Peter Lacy, Managing Director; Senior Executive, Accenture, People's Republic of China, a Young Global Leader.

Synopsis

Scaling the “Circular Economy” Heights at Davos – An Idea Whose Time Has Come

The Future Value Chain session with Doug Baker from Ecolab, Feike Sijbesma at Royal DSM, Jochen Wermuth at Wermuth Asset Management, Ma Jun from China’s Institute of Public and Environmental Affairs and Ellen Macarthur – one-time legendary sailor and now circular economy advocate supreme – all masterfully moderated by Adam Werbach of Yerdle, was the highlight of my Davos so far.

Panellists and a highly engaged and insightful audience really got underneath the surface of some of the barriers and enablers for scale at speed on the “circular economy” – the idea that we can create radical shifts in value chains and traditional modes of production and consumption to eliminate or dramatically reduce waste as well as using energy, water, waste and raw materials more efficiently in delivering products and services.

Key Points

Solving the sustainable growth conundrum – For those who have really thought through how to manage the conundrum of economic development, not just for a few in the West, but for a rising and justifiably expectant set of consumers and citizens and consumers in emerging and developing economies, the circular economy is the only game in town that allows growth within the limits of planetary boundaries.

It's all about the business model, stupid – The really interesting thing for those interested in the transformative and disruptive impact of the circular economy is not the technical and scientific intrigues of green chemistry, nor even the new wave of reverse logistics or R&D processes required. No, the real innovation that matters and that many of the panellists covered in different ways – from washing machines at Ecolab to new materials – is about business models. The shift from products to services, the next generation of recycling, re-use and refurbishment, the growth of collaborative consumption – all are shaping fundamentally different value propositions for consumers and potential game-changers in industries from automotive to footwear.

Embedding in the core means ... education, education, education – one of the things that panellists from the CEOs to Ellen Macarthur – a doyenne of popular engagement on the circular economy, the path to competitive advantage, as Sijbesma put it – emphasized was to ensure that sustainability is embedded at the core of the organization, not sitting with the CEO. And the vehicle that was talked about again and again was executive education (beyond really making sure the strategy and business case stack up).

The increasing role and power of information technology in the circular economy – Something stressed by Ma Jun, and which really resonated with me in the China context, was the power of digital and social media in making sustainability much more of a grassroots issue – see the recent unprecedented pressure put on Chinese policy-makers over record air pollution in Beijing, Shanghai and other major mainland cities,

Make sustainability and the circular economy “fun” – Jochen Wermuth's closing remark about making sustainability and the circular economy “fun” – citing the example of bragging rights about not only supplying electricity to the German grid, but also powering his Tesla electric sports car for one euro per 100 kilometres – was an important lighter-hearted message that we need to make the transition engaging and exciting for today's and tomorrow's consumers, rather than the often dull and earnest reputation “being green” has often earned.

I was also pleased to see my concept and call for “circular economy free trade zones” or similar vehicles to scale at speed around the world, was picked up and well received. Something we will pick up in various sessions during the week.

In essence, the core message – and one we have heard again and again in the Forum’s YGL Task Force on Circular Economy Innovation and also as the title of a joint World Economic Forum-Accenture publication last year – is that the future is doing “more with less”. And it feels like the circular economy is the pathway, a revolutionary and transformative, if not entirely new idea, whose time for serious action may just have come. But, we still have a long way to climb before we reach the real heights of circular – or sustainable – growth.

Disclosures

The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of the World Economic Forum.

Session objectives

How will new consumption and production models transform global value chains?